Investment platform Sarwa fined by Abu Dhabi Global Market regulator and DFSA

Firm was found making an offer of securities at ADGM and DIFC without an approved prospectus

The Abu Dhabi Global Market headquarters from Al Maryah Bridge. The financial free zone maintains a strict oversight of companies operating in its jurisdiction. Photo: Aldar

Abu Dhabi Global Market's financial regulator has fined investment platform Sarwa Digital Wealth (Capital) $122,500 for breaching rules on offering securities.

The penalty was levied after Sarwa was found making an offer of securities at ADGM without an approved prospectus during April and May last year, breaching Financial Services Regulatory Authority regulations, the financial centre said on Tuesday.

A prospectus must be approved by the FSRA and should contain all information that an investor would “reasonably require to make an informed decision in relation to the investment”, ADGM said.

Without the prospectus, potential investors “were not provided with sufficient information to make an informed decision in relation to the investment”, it said.

A total of 144 investors subscribed to the offer and committed about $2.1 million, ADGM data showed.

Sarwa, however, immediately reversed all committed subscriptions after the FSRA notified them of the concerns, ADGM said.

The FSRA’s investigation was co-ordinated with the Dubai International Financial Centre (DIFC), whose Dubai Financial Services Authority (DFSA) conducted its own investigation on a company linked to Sarwa within its jurisdiction.

The DFSA said it imposed a penalty of $191,100 on Sarwa Digital Wealth, a DFSA regulated and DIFC incorporated company (Sarwa DIFC), for making an offer of securities to the public in or from the DIFC without an approved prospectus, in breach of the Markets Law.

The DFSA also found that Sarwa DIFC withheld financial information that would have been included in an approved prospectus, and provided positive metrics that gave potential investors a misleading impression about the financial performance and position of Sarwa DIFC and Sarwa ADGM, collectively referred to as Sarwa, DFSA said in a statement.

Sarwa, which advises traders on stocks, exchange-traded funds and cryptocurrencies, declined to comment to The National.

ADGM, opened in 2015, is home to international banks, insurance houses, global asset managers as well as financial technology and cryptocurrency exchanges. It maintains a strict oversight of companies operating in its jurisdiction.

In February, it fined Baker Tilly and its audit principal $62,500 for auditing failures, and six financial institutions more than $46,000 for contraventions in their reporting.

In October last year, it also levied a $486,000 penalty on FinTech company Pyppl for breaking anti-money laundering rules. In August, it hit KPMG Lower Gulf with a $30,000 fine for breaching audit rules.

“This enforcement action demonstrates the FSRA’s robust regulatory approach to its regulatory framework, ensuring investor protection is of paramount importance and making sure all regulated entities maintain high standards of conduct,” Emmanuel Givanakis, chief executive of the FSRA, said.

The move “demonstrates the strong collaborative approach between UAE regulators through co-operating and sharing information in parallel investigations, thereby safeguarding the UAE’s financial ecosystem and protecting its investors”, Mr Givanakis said.

Sarwa has more than 150,000 registered users. It utilises algorithms to rate an investor’s risk tolerance and assigns them an investment portfolio of exchange-traded funds, charging them lower advisory fees than traditional financial advisers and wealth managers.

In August 2021, Sarwa raised $15 million in a funding round led by Abu Dhabi's Mubadala Investment Company. The series B round brings the trading platform’s total funding from regional and international investors to about $25 million since it was founded, the company said at the time.